The Auditor Tested a Sample of Recorded Sales Invoices for Evidence

question 2

Multiple Choice

The auditor tested a sample of recorded sales invoices for evidence of credit approval.Based on the results of the sample,the auditor concluded that there was a satisfactory rate of approvals.Unknown to the auditor,credit approvals in the population were not satisfactory.This would be an example of

• A) risk of overreliance.
• B) risk of underreliance.
• C) risk of incorrect acceptance.
• D) risk of incorrect rejection.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, used to cover fixed costs and generate profits.

Cost Of Goods Sold

The total direct costs attributable to the production of the goods sold in a company.

Sales

The total amount of revenue generated by the selling of goods or services.

Merchandise

Goods to be bought and sold in any type of business.